Rolls-Royce Shares: Can They Keep Climbing?

Rolls-Royce has kept its full-year targets intact and brought forward another £1.5bn of share buybacks, yet the stock is still well short of August's record.

Thursday's trading update lifted the shares as much as 3.9% to 1,395.2p before they closed 2% higher at 1,369.6p. That close was more than 21 times the September 2022 low of 64.44p, a gain of over 2,000%, but still about 14% below the all-time high of 1,586p. The question now is how much of the good news is already baked into the price.

Latest Market Moves

• Rolls-Royce gained 8.6% over the four sessions to Thursday's close of 1,369.6p, then slipped back to around 1,340p in early Friday trade.

• BAE Systems fell as low as 1,861.5p on Thursday before closing down 1.1% at 1,896p, while Rheinmetall has roughly halved this year after a second cut to its 2026 outlook.

• GE Aerospace, the largest of the jet engine makers, closed 3.5% lower at $330.86 in New York on Thursday.

• The FTSE 100 closed up 0.3% at 10,863 on Thursday, about 1% below its August record of 10,989.

Guidance Held, Buyback Brought Forward

This was a trading update, not a set of results, and the headline numbers did not change.

Rolls-Royce still expects underlying operating profit of £4.7bn to £4.9bn and free cash flow of £3.8bn to £4.0bn for 2026, the range it upgraded to in July.

The £1.5bn interim buyback is due to finish by full-year results on 25 February 2027 and sits inside the existing £7bn to £9bn programme for 2026 to 2028. It speeds up the return of cash but does not add to the total, and this year's £2.5bn tranche is substantially complete.

The next catalyst is already in the diary. Chief executive Tufan Erginbilgic said "we will revisit our mid-term targets at our Full Year results in February", which keeps the door open to another upgrade.

Data Centres Are Doing the Heavy Lifting

The strongest numbers came from Power Systems, not jet engines.

Order intake in the division rose 62% in the first nine months of the year and the backlog reached a record £8.6bn at the end of September, up from £8.0bn at the half-year. Gas engine orders for power generation nearly tripled on demand from data centres. A multi-year backup engine contract with a hyperscaler is also being finalised.

Civil Aerospace was steadier. Large engine flying hours reached 114% of 2019 levels in the first ten months, but the full-year figure is now expected towards the lower end of the 115% to 120% range, with high fuel prices leading some airlines to trim capacity.

Downside Risks: Peace, Budgets and Valuation

The obvious threat to a stock tied to defence is an outbreak of peace, but for Rolls-Royce it cuts both ways.

US-mediated talks between Russia and Ukraine in Abu Dhabi this week produced a prisoner swap but no ceasefire, while Washington and Tehran are still trading proposals through Qatar. A Ukraine deal could cool sentiment towards defence names. A Gulf settlement that reopens the Strait of Hormuz and lowers jet fuel costs would help flying hours in Civil Aerospace, the group's biggest division.

Defence budgets are the second risk, and Rheinmetall shows it need not take a spending cut to hurt. The German group has lowered its 2026 targets twice as contracts slipped and Berlin dropped a frigate programme. In the US, Democratic gains in the midterms have raised questions over the proposed $1.5 trillion defence budget.

The third is simply the price. The shares fell 27% from August's high to October's low without any change to guidance, hit by a slowdown in spare-parts growth at Safran and nerves over AI spending. At around 37 times trailing earnings, there is little room for disappointment.

Rolls-Royce Technical View

The monthly chart shows a long-term uptrend that is intact but losing momentum.

The shares cleared 1,000p in mid-2025, the area that had capped them in 2015 and 2018, and it has acted as a floor since. Pullbacks to 1,018.5p in November 2025 and 1,078p in March 2026 both held above it before the run to 1,586p in August.

The warning sign is the RSI. It made lower peaks while price made higher highs into August, a bearish divergence, and has since dropped out of overbought territory to around 61. October's 15.2% fall to a low of 1,158.6p followed.

November's bounce has so far stalled at the halfway point of that decline, which sits at 1,372p, almost exactly where the shares closed on Thursday. A push through there would bring the 1,586p record back into view. On the downside, October's low is the first support, with the 1,000p zone the level the longer-term uptrend needs to hold.

Source: SpreadEx | Rolls-Royce, Monthly Chart